14th June 1999 Archive

Microsoft tried to claim during the cross-examination of Garry Norris that IBM was "not one of the top-tier revenue producers for Microsoft", which stretched the definition of "top". Perhaps Microsoft meant that IBM paid Microsoft more than any other OEM, in view of what Microsoft was charging IBM for Windows. The first antitrust case against Microsoft did achieve an end to the old practice of Microsoft charging for an operating system with 'per processor' licences, even if the system did not have a Microsoft OS installed. IBM seems to have found itself trapped by an equally iniquitous problem, but found itself unable to do anything about it. IBM decided it would like to offer its customers choice of Windows 3.11 or Windows 95 at the time when there was considerable resistance about moving to Windows 95. In an unexpected answer to a question, and one that Pepperman did not want, Norris said: "And for about a six-month period of time, Microsoft made us pay both royalties, Windows 3.11 and the royalty for Windows 95." But this payment of double royalties was not the only iniquity: "We also paid Microsoft royalties on what they called designated systems, whether we shipped a licence with that system or not. We also paid you royalties on OS/2 as well." Some interesting information about OEM prices for Windows came to light. The per copy price for NT 3.51 to IBM was $195. With a volume commitment, IBM's price went down to $147.75. NT 4.0 to IBM was $127 with the so-called Windows Family Agreement, but IBM was very unhappy with this price since it believed from consultancy studies and intelligence that Compaq, DEC and HP were paying around $80. IBM was paying Microsoft $46.60 for Windows 95 in August 1996, which Pepperman suggested was what other comparable OEMs were paying, with the exception of Compaq. Microsoft told IBM it could have the same price as Compaq (believed to be no more than $25) if IBM stopped competing - a dangerous thing to say in view of the antitrust implications. ® Complete Register trial coverage

One of the big surprises from the evidence of Garry Norris has concerned the issue of IBM having underpaid royalties to Microsoft. Microsoft decided to link the negotiation of a Windows 95 licence to agreement about the audit of royalties due, realising this would speed matters up, since IBM's need for the final Windows 95 code was very great. It was therefore not possible for IBM to suppress the information that came to light. It was revealed by Richard Pepperman, counsel for Microsoft, that it was Jim Miller, a contract manager in IBM's procurement division, who had first threatened to suspend negotiations of the Windows 95 agreement until the audit was resolved. An internal IBM email noted that "Microsoft estimates $50-$100 million in underpayments based upon past experience with IBM." Norris responded: "Counsellor, that may have been Microsoft's position, but it certainly wasn't IBM's". Pepperman tried the old trick of pointing out that Miller left IBM a year later - as though there was a connection - without actually saying so, but his innuendo was ineffective. Miller's successor, Jerry Casler, revealed in an internal IBM email after a meeting with the OEM controller and the OEM director of operations from Microsoft, that "Restating what everyone knows, Microsoft is extremely upset with us and, in my judgment, with good reason. There is an unacceptable level of emotion and distrust. The root of this is a lack of communication and sharing of information across the board. This has been exacerbated by late and inaccurate payments (most frequently under-payments) the length of time the audit is taking and the fact that, in their view, we have so tightly locked the auditors with the confidential disclosure agreement that Microsoft won't have reasonable ability to validate it has been paid accurately." Jerry York, IBM's CFO, called Mike Brown, then Microsoft's CFO, presumably to apologise, and the email indicates that the call was "well-received". The audit was not finally agreed until the day of Windows 95 release. IBM had been doing an internal accounting review and found that there had been underpayment of royalties to the tune of $16.7 million - more than 20 percent of the amount due for LAN Manager and OS/2. A further $14 million was agreed, and the audit was settled. ® Complete Register trial coverage

Microsoft has turned to a small Java-cloning outfit, Transvirtual Technologies, to dig it out of the legal hole it's currently in, according to this morning's Wall Street Journal. If the Journal story is true it would appear that Transvirtual, which has previously espoused open source, has performed an interesting pirouette. Microsoft's problem stems from the latest legal rulings in the Sun-Java case. Microsoft is said to have infringed Sun's copyright, but has been given permission to clone Java. This of course is easier said than done if you haven't been operating clean room development from the start (and anyway, the concept of 'clean room' is probably anathema to Microsoft). So Microsoft has to buy in the technology if it's to rejig its Java strategy on the basis of a Java clone. But here's the puzzle. Berkeley-based Transvirtual released source code for its Kaffee OpenVM almost a year ago, and CEO Tom Wilkinson said then: "We decided to take our source code and put the GNU licence on it." Today, however, the WSJ reports that Transvirtual will introduce a product that supports Microsoft's Windows-only extensions to Java. This is technically feasible, but the notion of Microsoft getting wrapped-up in a GNU licence is boggling - there surely must be some kind of wrinkle here. But from some angles Transvirtual looks like just the sort of outfit Microsoft is looking for. Wilkinson recently spoke to Salon magazine about HP and Sun's arguments over Java: "I think that their relationship with Hewlett Packard shows that Sun really wants to have control," he said. Transvirtual has also been involved in the HP-inspired Real Time Java Working Group (a stick to beat Sun with), and is working with HP and other companies on Java compatibility test systems. ®

Net users in the Catholic Church want to canonise a dead Spanish bishop and make him the patron saint of the Internet. Born in 560AD, Isidore of Seville is regarded by many as the best choice for such a saintly position. His compilation of a 20-volume encyclopaedia -- one of the world's first databases -- makes him an ideal choice for the position. The Vatican has confirmed it has received a number of enquiries about Isidore's beatification and has said it is considering the appointment, according to a report in the Sunday Times. So it seems Net users struggling to make headway in the wibbly wobbly web could soon be able to set up a shrine next to their PCs to pray to Isidore in times of trouble. Of course, there are other problems associated with the presence of holy water, candles and incense near a keyboard but no doubt these could be overcome. If the Vatican is serious about Saint Isidore, it had better get its skates on and register a domain. While www.stisidoreofseville.com is still available, someone has already pinched www.netsaint.com. ®

3dfx hit Creative Technologies with a copyright infringement and breach of contract suit on Friday, lashing out at the add-in vendor's development of a wrapper application to allow Glide-based games to run on Creative's nVidia TNT-based 3D accelerator cards. Creative issued the first beta of the wrapper, dubbed Unified, almost a month ago. At the time, it insisted it was safe from 3dfx's ire because the software wasn't a wrapper. Instead, Creative brand manager Jim Carlson described Unified as a "pure transition layer and nothing more". That's why Unified contains no 3dfx code, claims the company. 3dfx, however, says its source code was used in the development of Unified, and since that code was provided solely for use with Voodoo cards, Creative has infringed both its contract with 3dfx and the latter's copyrights. Naturally, Creative has no truck with that argument, and since 3dfx has been refusing to comment on the evidence it claims to have for Creative's infringement, you have to wonder whether the plan here is simply to bully Creative into dropping the release of the software. Certainly, it has a record of threatening amateur wrapper developers with legal action (despite the company's own tech-support teams recommending their use in certain circumstances), so an attack on a professional developer doing the same thing is no great surprise. ®

Networking company Chernikeeff has made its 62-year-old owner one of the UK's wealthiest IT magnates. Peter Harrison bought the privately owned PC network integration business for £133,000 in 1979. He has sold 49.9 per cent of Chernikeeff to quoted South African outfit Dimension Data Holdings, valuing the company at £200 million. Harrison retains 50.1 per cent of Chernikeeff, valuing his own stake at over £100 million. The entrepeneur has invested £11.25 million of this cash in Dimension Data, where he has become a director. Middlesex-based Chernikeeff, set up in the 20s by Russian emigre Captain Chernikeeff, moved into data handling in the 70s. A decade later it moved into networking, and in 1998 introduced Cisco products into Britain. Other suppliers include WAN and LAN manufacturer Ascend, Compact Data -– which makes a data compression product for use with WAN links -- FORE Systems, Network Appliance, hubs and routers manufacturer ODS, and Xyplex. Harrison, 62, said the deal would allow the company to expand overseas. Dimension Data has 38 per cent of the South African market, as well as investments in Asia and Australia. "I could have carried on and continued to grow the company on an independent basis, but I could not see how I could have put in the investment of things such as facilities management. "The main driver behind this deal was the awareness that the product and the services are not restricted to national boundaries," he told yesterday's Sunday Times. Harrison, who is chairman of the old Reigatian rugby club development committee and a VP of Chelsea FC, admitted that increased competition in the market also lay behind the sale. "We see the market continuing to grow very strongly," he said. "However, there are more companies out there now." Chernikeeff has 170 staff, with offices in Oldham and Scotland. Last year's turnover was over £56 million. Harrison said it had been a tough decision to relinquish his independence in the company. "It was a big strugggle between heart and head -- my heart did not want to give up my independence." ®

Nice and slowly does it for Ericsson, the Swedish telecoms giant. It has refrained --so far -- from the urge to merge with a big datanetworking company. While Nortel, Lucent, Alcatel and GEC have stumped up billions for their US data networking businesses, Ericcson is showing far more caution. This week the company dipped into petty cash for the $30 million purchase of 75 per cent of Telebit A/S, a niche, Danish router manufacturer. Ericsson says it will buy three more small Internet infrastructure companies this summer. ®

Amazon.co.uk is being sued for selling a book deemed to be libellous by a senior Northern Ireland politician and joint winner of the Nobel Peace Prize. David Trimble, Northern Ireland's First Minister, maintains that The Committee: Political Assassination in Northern Ireland by Sean McPhilemy contains "horrendous allegations" about his alleged involvement in sectarian violence. "False accusations about one's own character are always unpleasant and distressing," Trimble told the BBC. "As much as the false allegations damage my reputation, they belittle the peace process and mock all those who have been a part of it," he said. A spokeswoman for Amazon.co.uk said she was aware of the legal action but was unable to comment. Although Amazon.co.uk is looking into the matter it has decided not to withdraw the book from sale while it awaits the outcome of its investigation. The Constitution and its First Amendment ruling on the freedom of speech prevents public figures from suing for libel in the US. Such liberal laws do not apply in the UK. ®

Mac-oriented Linux distributor LinuxPPC has begun shipping version 5.0 of its eponymous implementation of the open source OS on PowerPC. The new release brings LinuxPPC up to date with not only the latest kernel, 2.2, but the glibc 2.1 shared library. The kernel supports the iMac's USB ports, and is compatible with the new blue'n'white Power Mac G3 machines. A new installer boots the OS straight into X and the Gnome desktop environment for a more Mac-like installation process, though the software also ships with the Red Hat installer for users who prefer a more standard approach. In addition to Gnome, LinuxPPC 5.0 bundles the KDE desktop environment, plus the usual selection of window managers, server applications, programming tools and utilities. The new release also bundles a series of desktop themes, including a MacOS look and feel. LinuxPPC 5.0 is available now for free download or on CD for $32 here. ®

IBM is being cyber-Mooned after trying to switch staff pensions to a cash-related system. Big Blue workers are venting their spleens on a new Web site set up by a fellow employee, in what some would view as a career-limiting move. IBM Global Service staffer Sang J. Moon said he intended the site to be a place for employees to share information and ideas, not the hotbed of rage that it has become. Staff are using the site, set up three weeks ago, to find ways of embarrassing their superiors. Discussions have raged against IBM CEO Louis Gerstner taking home a whopping salary. One employee suggested paying an aeroplane to drag a banner criticising Gerstner across the skies. The 90-minute epic flight between the PC maker's lab and its research facility in California, costing around $480, would proclaim: "Hey Lou, thou shalt not steal". Many of IBM's 260,000 staff are using their PCs, the products they are paid to make, to protest. The site is getting 15,000 hits a day about the pension plan changes, which is effective from 1 July. From that date IBM will convert to a "cash balance" plan, which usually cuts benefits for longer-service workers, according to today's Wall Street Journal. This scheme generally rewards performance, not length of time at the employer. IBM is one of over 300 employers to move to this unpopular money-saving scheme, but this is the first Web uprising. Employees are logging onto the Yahoo site to compare old and new benefits, and working out how much cash they will lose. One engineer in Minnesota estimated that his 11 years at IBM would be rewarded by the new plan slashing his pension by 30-50 per cent. IBM said the changes would allow it to increase other types of compensation, such as stock options. Meanwhile, Mr. Moon, responsible for this pension-monitoring frenzy on the Internet, says he has been warned not to watch his site while at work, and not to use his company PC. He has been with the company for about five years and works for IBM Global Services in Bethesda, Maryland. ®

There are times when saying sorry is simply not enough -—just ask the poor beleaguered customers at eBay. They know that saying sorry all the time for the same mistakes soon begins to wear thin and lose all meaning. For the online auction house bombed again last week and remained down for part of the weekend. Believed to be one of the worst outages on record and one customer who stands to loose up to £2000 a day is reported to have said it was a personal "disaster". Yet scanning eBay's announcement board over the last five days is like reading the personal diary of someone whose life is falling apart and sliding further and further into a world of despair. Full Throttle "We are experiencing problems with our servers," it read on Thursday evening. "CGI is currently down, as well as the database server. This will cause error messages while performing most functions on our site. Our Engineering staff is on this full throttle, and we will update you as we get more information." But such optimism did not last long. "We are sorry," read an entry on Friday. "We know that you expect uninterrupted service from eBay. "We believe that this is reasonable, and we know we haven't lived up to your expectations. "We want to earn back your trust that we'll provide you with this level of service." For technicians at eBay, sorry, it seems, isn't the hardest word -- it's just one they seem to use a lot. ®

Iridium has laid off 15 per cent of its workforce -- around 80 people -- in the satellite mobile phone company's latest bid to stay in orbit. That said, the future for the remaining 470 staff doesn't appear to good. According to The Wall Street Journal, Iridium's subscriber base now totals 15,000. Compared to March's figure of 10,000, that doesn't sound too bad. However, the company has to hit 27,000 by the end of this month, one of the performance targets set by its creditors in May. ® See alsoIridium to cut call chargesIridium granted 30-day reprieve

Tired of getting spammed, but don't know where to turn? Easy. Sack your ISP and get another email address. Alternatively, you could refrain from signing up for Internet services, many of which sell on email addresses to junk email advertisers. So says Gartner Group, which has uncovered the startling fact that the longer you keep an email address the more likely you are to be spammed. Keep the same address for more than three years and you have a more than 40 per cent chance of getting more than 11 spams in any given week, according to Gartner. But where does that leave the less than 60 per cent -- Net no-hopers, every one -- who get fewer than 11 "get rich quick" and "come to our porno-site" emails a week? Spamming can get irritating enough for people to switch service providers because of "spam and more are ready to switch, particularly if the flow of spam increases," says Gartner analyst Jim Browning. And 36 per cent of some 13,000 users surveyed by Gartner would be prepared to switch, if spamming got worse. This would cost an Internet Service Provider with one million subscribers "about $7 million a year in lost subscription fees, and the price of additional workers and computers needed to handle the mail". Oh, really? Paid-for ISPs like Compuserve have thousands of customers who stop using the service but continue paying through their credit card. This is called inertia -- people don't get round to cancelling their subscriptions. (Which reminds this writer to cancel a Compuserve account, unused for more than a year). And as for sacking your ISP because of spam fatigue... it's all very well telling a market researcher you will do this, but doing the dirty deed is an entirely matter. That takes initiative. The Gartner survey was commissioned by Bright Light Technologies, which, surprise, surprise, sells spam-filtering services to ISPs. ®

Only the fittest of the fittest will survive the hard drive wars, according to DISK/Trend, the specialist market research firm. In 1999, there are only 18 active "or announced" manufacturers of rigid disk drives, compared with 20 in 1998 and 59 players at the beginning of the 90s. Companies have to adapt to an environment of "very short product life cycles and intense competition" if they want to stay in the game. However, the market could be turning the corner, DISK/TREND says. This year, disk drive sales are looking up, after a bloody 1998, when vendors sacrificed profits in a scramble for market share. In its 1990 report on the rigid disk drive market, DISK/TREND forecasts overall revenues to increase 7.7 per cent, boosted by a 17 per cent increase in unit shipments. In 1998, the industry shipped 144.9 million units, 11 per cent up on 1997. But the dollar value fell 5.2 per cent. Shipments in 1999 are expected to approach 170 million units rising to over 250 million units by 2002. IBM was the world's biggest disk drive vendor in 1998, with 27.1 per cent market share gained through captive (i.e. sold with its own computers) and non-captive sales, according to DISK/TREND. Seagate Technology and Quantum were second and third with respective shares of 19.8 per cent and 12.4 per cent. Prices per megabyte are becoming vanishingly small. In 1988 one megabyte would set you back $11.54. Today it would cost about 4.3 cents and in 2002, 0.3 cents. On the same timescale, the report predicts a rapid increase in drive capacity: Three to five gigabytes last year, five to ten this year and by 2002 the leading product group will be the 40 to 80 gigabyte range. ® Find out more at DISK/TREND

Online investors in the UK are being offered the chance to play the stock market without having to pay commission on their transactions. The promotion from Charles Schwab Europe applies to all UK quoted shares traded over the Web in July. "We see waiving the commission as a means of thanking our existing customers for their support during our first year," said Charles Schwab Europe CEO Bob Duste. "[It's also a] good way to encourage more people to try online investing, a technology which is rapidly transforming the world of private client stockbroking," he said. Since launching its service in the UK a year ago Charles Schwab Europe has traded more than £400 million worth of shares over the Net and around 1000 investors a week are joining the service. "It's a simple psychology," said Duste. "People like the sense of empowerment they get from the Net when deciding to buy or sell." Only when they're making money, though. It's unlikely they will feel particularly empowered when they lose their shirt. ®

Britain’s first GM food martyr, Dr Arpad Pusztai, has gone to the Web to defend his reputation as a scientist. Pusztai was forced to resign from the Rowett Research Institute in the so-called GM Potato Scandal. He had conducted research into genetically modified potatoes which indicated that they could be toxic. But a panel of Royal Society scientists said his research was flawed. Since then, other scientists have leapt to his defence. Dr Pusztai says his site web site is "primitive and under construction". The site contains comments on his research by the Royal Society and his response to its criticism. Credited by some with starting the current argument about the safety of GM foods, Dr Pusztai makes an unlikely hero for the anti-GM food brigade. He is a strong believer in GM technology -- provided it is handled correctly and transparently.

Storage company Hammer Distribution will move from its Basingstoke office following three ram-raid attempts. The distributor will relocate to larger offices, still in the Basingstoke area, this autumn. Paul Sangster, Hammer Distribution sales and marketing director, said a sense of urgency surrounded the move. "After last month’s ram raiding attempt, the third in nine months, the move could not come soon enough," he said. "The thieves did not steal anything this time as unexpected security, cages and 24-hour guards were introduced after losing £170,000 of stock in the December 1998 attack." Hammer will leave its industrial estate, which it shares with many other IT companies including IBM and Computer 2000. Sangster said the company needed more stock and space anyway, and had decided to move a few months ago. "But the recent theft attempts have only prompted us to action the plan." Last year Hammer was targeted by thieves twice, losing £170,000 in stock. Last month’s attack saw a 7.5 ton stolen truck smash into the company’s warehouse, demolishing a wall.®

Fashion Group, Arcadia, opened the doors to its new cyber mall this morning in a move that brings together a number of e-tailers all under one roof. There has been no shortage of hype surrounding the launch of Zoom, described in some quarters as the "largest e-commerce hub" in the UK. Stocked with Arcadia's own stores, including Principles, Top Shop and Burtons Menswear, the cybermall also contains other well-known brands such as HMV, Expedia and Interflora. The venture is the first of its kind in the UK to be established by a retailer and could give a welcomed fillip to e-tailing in the UK. High street banks, Natwest and Barlcays, have both tried similar schemes but these have both failed to deliver the goods, as it were. ®

The Business Software Alliance (BSA) has been hauled over the coals by UK advertising regulators for intimidating companies indiscriminately. The Birmingham Chamber of Commerce and Industry objected to a mail-shot follow-up letter which warned IT professionals about the costs of software piracy. The complaint, upheld by the Advertising Standards Authority (ASA), claimed that the letter misleadingly implied that it was official and that recipients were legally obliged to respond. The BSA letter stated: "This is a formal notification that we have not yet received your reply to our recorded letter of November 5...It is important that we receive your information by return, so that we can prevent your company’s details from automatically entering BSA Software Watch – a database of companies that we are concerned may be at risk of software mismanagement. "Penalties for ignoring copyright law are real – as the enclosed press clippings show." Designed to scare It urged companies to return the duplicate software declaration form enclosed in the letter within seven days. Company officers were responsible for ensuring that their staff were abiding by software laws "and face the risk of imprisonment if their company breaks the law", it stated. The ASA said the phrase "formal notification" implied it was an official letter. In addition, it said: "in the absence of evidence that the targeted companies were benefiting from illegal software, the letter did not warrant this tone of fear". The BSA, which has its UK base in Knightsbridge, London, admitted the letter was designed to appeal to fear. This was because it considered software piracy an extremely serious issue, according to this month’s ASA report. The BSA even tried to supply information that showed the economic implications of software piracy and the tone of the letter was not disproportionate to the risk of using illegal software. The Authority was not convinced, and asked the BSA to change the letter. In an interview with The RegisterMike Newton, campaign relations manager at the BSA, maintained the organisation was justified to send out the letters. "This is a major issue. Up to 50 per cent of software in small businesses is illegal, we believe," he said. "This was a pretty upfront campaign. When we send people polite requests they ignore them." Newton said the BSA would not apologise for striking fear into the heart of the IT industry. "We were driving people to take action. It wasn’t fear, it was concern," he said. ®